Traders should expect up to 40 algorithms on the market to trade fixed income and foreign exchange by the time the Markets In Financial Instruments Directive II (MIFID II) takes effect in 2017, according to research from EY.
In an interview with The Trade, Anthony Kirby, head of regulatory reform for asset management and capital markets for the consultancy formerly known as Ernst & Young, said the push for transparency is driving innovation.
He explained: “Today we have 40-80 for the equity market but we will see at least half that number on the non-equity market by the time MIFID II takes effect.
“What ends up being low touch could be the majority of corporate debt, emerging market debt, high yield, CDS, equity derivatives and quite a few of the regular FX.”
Kirby said the more irregular stuff will continue to be telephone traded, however.
He added: “A lot of it will be predicated on the business cases for the firms concerned. One of the big questions that people will be asking is what is liquid and what is not?
“What does that look like under stressed conditions? We are also seeing a lot more focus on forensics. There are new innovations coming to market which allow you identify who is placing a trade.”
Kirby worked at Instinet, CME Group and Merrill Lynch Investment Management prior to joining EY in January 2008.